Suppose you plan to go to school this summer. The cost of tuition ...

[pepyto]

Suppose you plan to go to school this summer. The cost of tuition and textbooks is 1,400 and housing, board, and entertainment will cost you 500.
 
  If you didn't go to school, you'd live in your parents' house for free, but your other living expenses would be about the same. Also, if you didn't go to school you'd work full time and could earn 8,000. You can still work part time while attending the summer school, but you will earn only 3,000. a) What will the summer school cost you in terms of money explicitly paid? b) What are the opportunity costs of going to summer school that you don't pay explicitly? Explain. c) What is your total opportunity costs of going to school this summer? Explain your answer.

Question 2

If aggregate demand decreases and neither short-run nor long-run aggregate supply changes, then
 
  A) the price level increases in the short-run and decreases in the long run.
  B) there is an inflationary gap.
  C) there is a recessionary gap.
  D) in the long run, the long-run aggregate supply will decrease.

[Rilsmarie951]

Answer to Question 1

a) You explicitly pay the cost of tuition and textbooks (1,400 ) and the cost of housing (500 ), so your total explicit costs are 1,900.
b) Your opportunity cost is what your give up to go to summer school. You forego a fulltime job, at which you would earn 8,000, in exchange for a part-time job, where you earn 3,000, which means you give up 5,000. Although you don't pay this money explicitly, you lose the opportunity to earn it and so it's an opportunity cost of attending summer school.
c) First, your opportunity cost includes the cost that you pay explicitly (1,900 ), which you have to pay only if you go to school. If you decide not to go to school, you can use this money to buy something elsean opportunity you are giving up. Second, as explained in the previous part, you are also giving up 5,000, although not paying this money explicitly. So your full opportunity cost of going to school is 1,900 + 5,000 = 6,900.

Answer to Question 2

C